Tesla share dragged down as senior staff leave

Tesla was stung by two senior departures on Friday, adding to the growing list of executives who have left the business, and sending its shares down by as much as 10 per cent.

The carmaker’s chief accounting officer, Dave Morton, announced he was resigning less than a month after arriving, citing the “level of public attention placed on the company”.

Gabrielle Toledano, human resources director, then told Bloomberg she would not return from a leave of absence. Her departure was confirmed by a source inside the company.

The announcements also came on the final day for Tesla’s most senior communications director, Sarah O’Brien, who vacates one of the positions in the company with the highest turnover.

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Chaos

The departures point to the chaos inside the upper echelons of the electric carmaker, which has shed more than two dozen executives over the past two years, and come exactly a month after chief executive Elon Musk wrote on Twitter that he had "funding secured" for an audacious bid to take the company private. The bid never materialised and was finally scrapped.

The announcements also came hours after Mr Musk smoked marijuana – which is legal in California although prohibited at Tesla – during an internet interview.

Gene Munster of Loup Ventures, one of Mr Musk’s staunchest defenders, criticised the appearance.

“The use of recreational drugs, legal or not, goes against the unspoken rules of being a public CEO,” he said. “Elon’s actions are making it harder and harder to support Tesla as a company.”

Mr Morton wrote in a statement: “I want to be clear that I believe strongly in Tesla, its mission, and its future prospects, and I have no disagreements with Tesla’s leadership or its financial reporting.”

That did nothing to soothe shareholder worries about the company. The company’s finances are under particular focus because of Mr Musk’s promise to report a profit in the third and fourth quarters, and to avoid raising any further capital this year.

Mr Morton had reported to chief financial officer Deepak Ahuja. Tesla said its accounting functions and personnel “will continue to be overseen by both Tesla’s chief financial officer and its corporate controller, as had been the case before and during Dave’s transition to Tesla”.

Just after the opening bell on Wall Street, Tesla shares dropped 10 per cent before paring losses; they were down 5 per cent by lunchtime. Tesla’s debt was also under pressure: a $1.8 billion (€1.5 billion) bond maturing in 2025 dropped three points to 82.5 cents on the dollar, bringing the yield to 8.7 per cent.

Disarray

One former Tesla supply chain executive said high turnover among executives had created disarray inside the company and had made it hard to establish processes that the company could build on as it grew.

Mr Musk has continued to run the company like a startup, meaning that it is constantly “inventing” ways of dealing with new problems rather than building an institutional knowledge to enable it to scale up, this person said. “With a startup, you’re inventing all the time.”

Mr Musk tried to paint recent departures as part of a plan to strip out bureaucracy and pare the company’s costs. But the attempted overhaul came just as Tesla was coming under intense pressure to escape what the chief executive called the “production hell” of trying to produce the Model 3, greatly adding to the management complexity at a critical time. – Copyright The Financial Times Limited 2018